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Financial Issues This forum is for discussing any of the financial issues involved in your divorce.

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Old 04-07-2015, 02:08 PM
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Default Reckless depletion

Does anyone know any details around this area of the law?

I realize the equalization payment can sway from 50/50 if one of the partners has recklessly depleted assets behind the other's back.... but what about a scenario where there are no net assets left at time of separation? i.e. negative net worth:

- Man has recklessly depleted say 100K secretly behind woman's back during 8 year relationship (3 yrs marriage, 5 yrs co-hab).

- Woman now demands divorce and says will hire lawyers to get as much as possible out of Man, whos only asset is a 50K fair value pension to be earned 25 years down the road.

- Out of the $85K of current debt now, only 30k is legally under Man's name. Remainder $55k is under wife's, and wife & parents joint.

- So, say hypothetically the judge says "Man needs to pay woman $55K in restitution for past reckless depletion", or something like that. And, in addition, the Woman has also been awarded $3.5K in monthly support according to the ontario child/alimony calculators. So, the combination of Man's new $55K debt, current debt and sppport payments would force the man to rent a room in a basement eating tuna for the rest of his kids lives, leaving basically no disposable income. Given the $3.5K/month awarded in support to the spouse, Man has no way of paying off his current, or to-be-assigned debt and is likely facing bankruptcy.

Also, as the Man is at fault, even if he doesn't hire a lawyer, I'm assuming all legal fees incurred by Woman could also be assigned to Man... (or at least half)

Does anyone know if there is some sort of stop-loss rule where Man could be spared of assigned equalization debts he can't reasonably pay? I don't think I know how this really works, but I would have thought the support/alimony is done first, and then a whopping penalty would be tacked on in addition for the depletion? It just seems to me there must be some maximum to the amount of future punishment-payments to be made by Man in this case. On the other hand, Woman and her parents would be stuck with $55K in debt under their names that Man could have perhaps otherwise paid off with the recklessly spent funds in the past.

In the end, I'm wondering if judge would look at all facts and ensure every single penny that Man earns for the next twenty years goes to Woman, with no money left for quality of life. Or, is there some grace provided to Man in this case.

And no, Man has no money for a lawyer haha.
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Old 04-07-2015, 03:00 PM
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Your thoughts are all over the place, and I can't tell where you are in your equalization/support/agreement process. If you haven't got equalization sorted out yet, how can you have a support award ordered already? But here are some things to consider.

I think only the three years married counts. Whatever debt the man brought into the marriage he has to keep for himself. After the marriage, the money, income, expenses, assets and debts are considered pooled, even if one spouse is completely ignorant of it.

I think reckless depletion is usually for situations where one spouse dissipated assets leading up to the separation, in an attempt to hose the other person. For a situation where one partner was just bad with money all along, I'm not sure there's a way to get restitution. Did the reckless spending result in assets that are now to be divided, or is it just plain gone? Who benefited from the spending? Both spouses, or just the man? If he wants to avoid court, he might offer to take on an unequal part of the debt, to be fair and acknowledge that he benefited from it more than the woman.

Legal costs are usually paid by the person incurring them, UNLESS one of the spouses has rejected a reasonable offer, is taken to court and loses there. The man would only be responsible for the woman's legal fees if the woman made a reasonable offer but he chose to go to court anyways but ended up with an order the same or worse than her offer, he'd have to pay her fees.

The man is on the hook for child support if the woman has the kids most of the time. Is there a reason he's not going to have the kids half the time? But he's not on the hook for spousal support unless the woman can prove entitlement to it. Does the woman have a career? Did her employment suffer as a result of the relationship?
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Old 04-07-2015, 03:48 PM
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This is all hypothetical. Have not gone into divorce proceedings yet - but from what I've been reading, i guess Net Family Property in terms of valuation can't go below zero. My main question is can a judge effectively enforce Man to take on 55K of debt that is not under his name, as punishment for reckless depletion, when he doesn't have the means (credit/income) to take on that debt.

Reckless depletion includes (d) a spouse’s intentional or reckless depletion of his or her net family property; racking up secret gambling debts fits that bill - and i've read court cases where there is restitution. In this case though, it's plain gone. Man has been supporting family, paying mortgage, food etc. but running gambling losses at same time under his own name.

Man wants joint custody, but I was thinking he woulndt be able to get it if the payments were so astronomically high, forcing him to rent a 1 bedroom room without a separate bedroom to host his children overnight, for example.

Woman has a career yes. Her employment, nor the kids, ever suffered. She suffered by not being able to enjoy vacations etc. that would have been possible had the reckless spending not have taken place.

How bad can Man's life really get as a result of going to the courts.
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Old 04-07-2015, 04:09 PM
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Quote:
Originally Posted by Fat Mike View Post
This is all hypothetical. Have not gone into divorce proceedings yet - but from what I've been reading, i guess Net Family Property in terms of valuation can't go below zero. My main question is can a judge effectively enforce Man to take on 55K of debt that is not under his name, as punishment for reckless depletion, when he doesn't have the means (credit/income) to take on that debt.

Reckless depletion includes (d) a spouse’s intentional or reckless depletion of his or her net family property; racking up secret gambling debts fits that bill - and i've read court cases where there is restitution. In this case though, it's plain gone. Man has been supporting family, paying mortgage, food etc. but running gambling losses at same time under his own name.

Man wants joint custody, but I was thinking he woulndt be able to get it if the payments were so astronomically high, forcing him to rent a 1 bedroom room without a separate bedroom to host his children overnight, for example.

Woman has a career yes. Her employment, nor the kids, ever suffered. She suffered by not being able to enjoy vacations etc. that would have been possible had the reckless spending not have taken place.

How bad can Man's life really get as a result of going to the courts.
The woman clearly does not have any entitlement to SS then. If you have 50-50 custody, then CS would be offset instead of full table amount. So you ought to be able to afford a place that the kids could live in even if it's cramped.

Do you think it's fair for the woman to take on debt she never knowingly incurred and never benefited from? The man had his fun at the casinos, now the debt is coming due. It may mean making sacrifices for a few years. Talk to the bank and see what they can do to help you with a loan that would be lower interest than the gambling debts.

Making an offer that includes taking on a greater share of debt might be acceptable to the woman and save you the expense of court.
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Old 04-07-2015, 05:16 PM
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that's exactly it - i want to know what Man's absolute worst case scenario would be before making an offer. Can a judge deliver out a financial punishment so hard, with payments so high, that it would force Man into bankruptcy.
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Old 04-07-2015, 05:23 PM
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Bankruptcy is very common in divorce, often both parties end up going bankrupt, especially once legal fees become due. (estimate $10,000 per day of trial, as an example)

My only advice is to declare bankruptcy after the case is done rather than before when you will still need to find a way to pay legal fees but without credit.

If one or both parties owe more than 50k and can't imagine ever paying it off with or without the other person, bankruptcy seems like a better way to me.

Equalization includes both assets and liabilities, and yes a judge can and will order an equalization payment even when a party cannot afford it. Equalization is simple math provided proper disclosure has occurred.
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Old 04-07-2015, 06:31 PM
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1. Treat bankruptcy as a friend instead of an enemy.
2. Judges can order whatever they want and it is EXTREMELY rare that an appelate court will say "that is too much"
3. There are limits to how much can be garnished from your pay
4. You can work under the table.

I beleive the very major default is 50/50 so to prove otherwise the guy had to be an absolute idiot and thus deserves it.

However, remember all orders (not agreements) in regards to family patrimony are considered CIVIL debts so they are discharged at bankruptcy time.

I am at the tail end of a situation where I am ordered to pay 50% of my gross income to the ex AND ordered to pay all her legal fees + her debts from before we were married - and this was after a 5 year marriage and I have my kids 39% of the time. All because she is a useless unemployed lazy moron and I make like 70k so the judges were laughing at me.... saying i have a good job and she is poor so I need to support her.
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Old 04-07-2015, 06:38 PM
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I really hope the man gets the gambling under control.
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Old 04-07-2015, 07:06 PM
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Links I believe you meant to say that SS and CS are debts which are not discharged (erased) through bankruptcy.
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Old 04-07-2015, 07:44 PM
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What I meant to say is that EQUALIZATION debts ARE discharged in bankruptcy but you have to time things correctly. AFTER the judge's order....
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